FIN 250 Module 5 Insurance Assignment Example

Insurance Needs Analysis for the Dunbar Household

[Student Name]

Southern New Hampshire University

FIN 250: Personal Financial Planning

Module Five Assignment

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Insurance Needs Analysis for the Dunbar Household

Introduction

A baby changes what the Dunbars' insurance must do. Until now, if either partner died or could not work, the other could support themselves. From April, a child will depend on both incomes for eighteen years or more. Module Four built a budget and a debt plan that assumes both paychecks continue. This paper tests that assumption by reviewing each policy the couple holds, finding the gaps and recommending coverage that fits their budget.

Health Insurance

The couple is covered as employee plus spouse under Kayla's employer plan, with a $1,000 family deductible, 20 percent coinsurance and an out-of-pocket ceiling of $5,000 a year. Prenatal visits are covered in full as preventive care. Based on the hospital's estimate for an uncomplicated birth, the couple should expect to pay about $1,500, which they will take from the emergency fund in April and refill from the child tax credit on the following year's return. Two steps are essential. The baby must be added to the plan within 30 days of birth, and moving to the family tier raises the premium by about $50 a month, which the $250 allowance for baby costs in Project One will need to absorb.

Disability Insurance

Disability is the risk the couple had not considered. The Social Security Administration (2024) estimates that about one in four of today's 20-year-olds will become disabled before reaching full retirement age, and Social Security disability benefits are hard to qualify for and modest when paid. Marcus's employer provides group long-term disability that pays 60 percent of salary after a 90-day wait. Kayla, whose income is 55 percent of the household's, has nothing. A dental hygienist's work depends on her hands, back and eyes, and a wrist injury could end her ability to work in her occupation.

Her practice offers voluntary group long-term disability through payroll that she declined when she was hired: 60 percent of salary, up to $5,000 a month, after 90 days, for about $38 a month. She can enroll at open enrollment in January. Group policies like this often exclude conditions treated in the months before coverage starts, which may include pregnancy complications, so the policy will mostly protect her after she returns to work. An individual policy with an own-occupation definition would protect her better, at roughly $130 a month, and should be reconsidered once the card is paid. For now the group policy closes most of the gap at a cost the budget can carry. The emergency fund covers the 90-day wait. Marcus's group benefit, at 60 percent of his pay, would replace about $3,050 a month before tax; his policy is adequate for now, though it would end if he changed employers.

Life Insurance

Kayla has group life insurance equal to one year's salary, $74,000, which ends if she leaves her job. Marcus has none. Industry surveys find that many adults believe they need more life insurance than they own (LIMRA, 2024), and Bernheim et al. (2003) found that coverage often bears little relation to how vulnerable a surviving spouse would be. Rather than use a multiple of salary, the analysis adds up what a surviving partner and child would need and subtracts what would be available.

Life insurance needs analysis

Federal student loans are discharged if the borrower dies, so Kayla's loans are not included. Twenty-year level term policies fit the need, which falls as the child grows and debts are paid. Quotes for healthy nonsmokers of their ages were about $26 a month for Kayla and $29 for Marcus. Whole life coverage of the same amounts would cost more than ten times as much and is not recommended; the couple's savings are better directed to the match, the emergency fund and debt repayment.

Auto Insurance

The couple carries liability limits of 50/100/50, meaning $50,000 per person and $100,000 per accident for injuries and $50,000 for property damage. Washington's minimum is lower, at 25/50/10, but a serious accident involving a new pickup could easily exceed either. Raising limits to 100/300/100 adds about $20 a month. Module Two showed that the truck is worth $5,800 less than its loan. If it were totaled, the insurer would pay its market value and the couple would still owe the difference. Their insurer offers loan payoff coverage for about $6 a month, which closes that gap until the balance falls below the truck's value.

Renters Insurance

The couple has no renters insurance. Their landlord's policy covers the building but not their belongings, and it provides no liability protection if a guest is hurt or the dog bites someone. A policy with $30,000 of personal property coverage and $300,000 of liability costs about $15 a month in their area.

Cost and Budget

The recommendations add $134 a month: $55 for two term life policies, $38 for Kayla's disability coverage, $20 for higher auto limits, $6 for loan payoff coverage and $15 for renters insurance. To keep the Project One debt schedule intact, the couple agreed to lower the hunting and truck accessories budget from $150 to $75, cut subscriptions from $60 to $30 and drop the insurance add-ons on their two phones, which together free about $133 a month. The family tier health premium remains a small strain that may delay the card payoff by a few weeks.

Conclusion

The most important finding is the disability gap on Kayla's income, which is larger than the household's and was entirely uninsured. With $1.1 million of term life coverage, disability protection for both partners, stronger liability limits and renters coverage, a death, injury or lawsuit would no longer undo the plan. The cost, $134 a month, is covered by modest cuts the couple chose.

References

Bernheim, B. D., Forni, L., Gokhale, J., & Kotlikoff, L. J. (2003). The mismatch between life insurance holdings and financial vulnerabilities: Evidence from the Health and Retirement Study. American Economic Review, 93(1), 354-365. https://doi.org/10.1257/000282803321455340

LIMRA. (2024). 2024 insurance barometer study. LIMRA and Life Happens.

Social Security Administration. (2024). Disability benefits (Publication No. 05-10029). https://www.ssa.gov/pubs/EN-05-10029.pdf